South Africa-focused Eastern Platinum’s (Eastplats’) TSX-listed stock last week jumped as much as 147% following a temporary trading halt to announce a $225-million asset buyout by Chinese firm Hebei Zhongbo Platinum.
Vancouver-based Eastplats’ main asset is the platinum-group metals (PGMs) operation, the Crocodile River mine (CRM), in South Africa’s North West province, which was shuttered on August 1 last year. The company is also busy developing its nearby eastern limb project, but it too was placed on care and maintenance in the fourth quarter of 2012.
The deal was expected to close within three to six months and would see Eastplats emerge cash laden and asset free, able to take advantage of the “considerable opportunities in this weak market”.
TSX-, Aim- and JSE-listed Eastplats ended the three months ended September 30 with $87-million cash in hand – down from $92.9-million in the prior quarter – as it held its cash, cash equivalents and short-term investments primarily in Canadian dollars, which weakened by 3.8% against the US dollar over the period.
Upon closing, Hebei Zhongbo would become the operator of CRM and own all other Eastplats subsidiaries, direct interests and joint venture positions.
All Eastplats’ properties are situated on the western and eastern limbs of the Bushveld Complex (BC), the geological environment that supports over 75% of the world’s PGM output.
The company’s main assets are an 87.5% direct and indirect interest in Barplats Investments, whose main assets are the CRM, located on the western limb of the BC; the Kennedy’s Vale project, on the eastern limb of the BC; an 87% direct and indirect interest in Mareesburg platinum project, on the eastern limb of the BC, and a 93.4% direct and indirect interest in Spitzkop PGM project, also on the eastern limb of the BC.
“The entire resource sector is under considerable pressure and PGMs have been disproportionately impacted as a result of a number of factors unique to the sector. “The capital required to advance the Eastplats assets into production is not available in the public markets at this time and we are very encouraged by the ability of Hebei Zhongbo to deploy its resources in this regard,” Eastplats president and CEO Ian Rozier said.
He added that the foreign capital and the potential job creation would contribute to the ongoing socioeconomic development in the mine’s outlying areas.
Closing the transaction was subject to executing definitive documentation and certain conditions, including Eastplats shareholder and South African and Chinese government approvals.
The parties had agreed that certain conditions could trigger payment of a break fee of $11.25-million.